Weekend auctions: confidence returns

Early signs are good for the Sydney property market this year, with the weekend auction clearance rate a solid 71.6 per cent.

"It's the highest recorded in years and nearly 20 per cent higher than the same weekend last year," the senior economist at the Fairfax-owned Australian Property Monitors, Dr Andrew Wilson, said.

There were 263 auctions on Saturday, but the real test comes over the next two weekends. More than 500 auctions are scheduled for both Saturdays.

A warehouse apartment in a Surry Hills laneway, sold for more than $500,000.

One of the hottest weekend auctions was for a warehouse apartment in a Surry Hills laneway, for which the agents had been quoting about $500,000.

Advertisement

The 68 sq m Esther Street conversion was tucked in behind Bourke Street Bakery, in what Bresic Whitney described as the "art precinct".

The one-bedroom apartment had no outdoor space and no off-street parking, with little prospect of even on-street parking nearby.

Yet the chance for a relatively affordable home or investment, with the bakery's popular pork and fennel sausage rolls and coffee just footsteps away, proved a powerful lure.

"We had 80 parties inspect it and we issued about 13 contracts through the campaign, with five registered on the day," agent Simon Noak said.

All five participated in the auction, with a hopeful first-home buyer kicking off the bidding at $470,000. Investors were also keen, attracted by the likely $525 per week rent. However, the last of those put in her last bid at $550,000. "It didn't add up for us after that," she said later.

Then an owner occupier came back with $5000 more, before the buyer's bid of $560,000. "She probably would have kept going," Noak said.

"She'd been looking for some time and was familiar with the block."

The investor and her partner walked away thankful they hadn't got carried away in the excitement. "I had to hold her back," he said. "We'd have to work too hard to make that one work."

24 comments

Nope not wrong. Nobody said it would drop 40% in 2012. It is 40% overpriced based on rental returns and in a bubble. All bubbles burst. So lolz back at ya.

Commenter

Allan

Location

Prahran

Date and time

February 18, 2013, 1:49PM

Still waiting for people on both sides of this tired argument to realise that they're both wrong. The answer is somewhere in the middle - we've seen a correction over the last few years bringing prices down on average. They are probably still a bit too high, but with rising incomes and rental returns also rising to match, it will all meet somewhere in the middle.

Prices may be inflated, but calling it a bubble that is going to burst is hyperbole and only stands to make people look stupid. Likewise, let's not pretend that people spending 35+% of their incomes on housing is sustainable.

Commenter

Zenith

Location

Sydney

Date and time

February 18, 2013, 2:03PM

@DMHRefer Allan's comment below yours. I'm not sure who was forecasting a 40% drop in values last year - probably no one. But for some considerable time now The Economist, amongst many others, has been calling the market significantly over-valued based on rental returns and comparisons to other OECD cities. Forgive me but personally the Economist carries a bit more weight than the "I reckon" comments one sees so frequently here.

Australian housing prices doesn't need to fall by 40% for Allan to be on the laughing side. The current rental yields based on the market price of houses basically guarantees a loss no matter how you see it. Without skyrocketing capital gains, buying a house in this market is a guaranteed loss.

Commenter

Mr Ponzi

Location

Date and time

February 18, 2013, 2:59PM

Agent here. Our economy is different wherever you go and real estate responds to local conditions. I can find suburbs around Australia where property prices have already fallen 40%. I can find examples where prices have risen more than 40%. I am not sure what debate I am supposed to “win” by doing so.

Allan and the other bears are right in saying prices, when measured on a large scale, are comparably high. Any major sustained shock to the economy affecting employment would have a serious affect on house prices in many areas. However if growth remains steady to rising in a long-term low interest rate market, there is no reason that prices cannot keep rising in many areas, and DMH and the property bulls would be correct.

If you have poor job security, a low deposit and fear your long-term ability to service a mortgage you are probably better of renting. If you have ample savings, high job security and would have no stress servicing a mortgage then you may wish to buy a home. There is nothing wrong with renting your whole life. There is nothing wrong with buying a home if that is what you want to do. You may be located somewhere that prices are about to rise from $300,000 to $450,000. You may be in an area where the opposite may happen, I have no idea where you are and neither does DMH or Allan. Do what is best for you, where you are, doing the most homework you can. And don’t let anyone rush you into what is likely to be your largest investment.

Commenter

aletheia

Location

Date and time

February 18, 2013, 3:13PM

aletheia

I must say that based on your past comments, you do have a tendency to be rather unbiased about property which makes you kind of like the "extinct' sort in the property industry.

However I think your comment has some serious flaws."Any major sustained shock to the economy affecting employment would have a serious affect on house prices in many areas" - I think you have put the cart before the horse there. It is not rising unemployment, external shocks or recessions that cause property downturns. It is property downturns that CAUSE recessions. The cause of the GFC was the collapse of the US housing market. Furthermore if you look at Ireland, Spain, Greece and increasingly with China. The slow downs in their economies have all correlated with the ending of property booms that prior to the recession went hand in hand with the economic boom.

"You may be located somewhere that prices are about to rise from $300,000 to $450,000" - the problem is, to pick property 'hot spots' is down to dumb luck. If you as a property agent can pick hot spots with even 60% accuracy, why are you still selling houses? Why not revert your own business or job to property investing and you will be immensely wealthy?

If the bulls really are as bullish as they say they are, why aren't the banks, major real estate firms, media and other vested interest parties reverting all their available funds to buy houses?

Commenter

Mr Ponzi

Location

Date and time

February 18, 2013, 3:44PM

Mr. Ponzi,

I am sincerely sorry that you do not know how to find a property that can return more than 6% in a year. But that does not mean that they do not exist. Just as the sharemarket has those little gems, so too does the property market.

Allan,

Are CBA shares 40% overpriced too?

Commenter

Tano

Location

Sydney

Date and time

February 18, 2013, 4:02PM

71.6% clearance eh? So that means of the 263 up for auction 189 properties were sold? Remarkable! Oh-oh, let me guess - how many of the 263 were "not reported"?